). The upper band and lower band are shifted up and down from the middle band by adding and subtracting the number of standard deviations (e.g., 2
BOLLINGER BAND
Bollinger Bands are displayed as three bands. The middle band is a normal moving average (). The upper band and lower band are shifted up and down from the middle band by adding and subtracting the number of standard deviations (e.g., 2
= SMA of closing prices in n units of time periods
In our Java Charting System, n is defaulted as 20 and the number of standard deviations for calculating the upper and lower bands is defaulted as 2.0. However, it is still flexible for you in entering a more appropriate figure in different time horizon.
Bollinger Bands have the following characteristics:
(1) prices moving outside the bands imply a continuation of the current trend; (2) sharp price changes tend to occur after the bands tighten; (3) bottoms and tops made outside the bands followed by bottoms and tops made inside the bands call for reversals in the trend; and (4) a move that originates at one band tends to go all the way to the other band. The above Chart representing the price movements of "China Mobile" shows most of the characteristics of Bollinger Bands.